A life insurance policy is a deal between a person and an insurance company. The person pays premiums and in return, the company promises to pay their loved ones after they die. This payment is called a death benefit. Some policies give a maturity benefit if the person lives through the term. If you’re looking to secure your family’s financial future, you can conveniently buy life insurance online through various reputable providers.
How Life Insurance Works
- Premium Payments: Policyholders make payments in two ways: upfront or regularly, as agreed.
- Coverage Period: There are two types of life insurance, one that is effective for a particular period and the other for the entire life of the policyholder.
- Death Benefit: If the policyholder dies, the money is paid to the beneficiaries during the coverage period in its entirety.
- Maturity Benefit: Some policies provide the policyholder with a lump sum if they are alive beyond the term agreed on between them and the insurance firm.
Life insurance has several benefits. Among the most notable advantages of life insurance policies are the following:
- Safeguarding Finances
It builds financial security for your family. It includes a death benefit which pays a fixed sum to the beneficiaries upon the policyholder’s death. Thus, it ensures your family’s financial protection.
- Develop A Saving Habit
Insurance needs regular payments, or premiums, to stay valid. If you skip payments, the policy might be cancelled. This requirement fosters a saving habit through consistent investments.
- Promotes Tax Savings
The government has extended tax savings to various investment instruments to encourage savings and investment. One such tool is life insurance. Under Section 80C of the Income Tax Act of 1961, you are eligible to receive a tax deduction of up to Rs 1.5 lakh for your annual premium. You thus get the advantage of both investment and tax benefits of life insurance.
- Reach Your Major Financial Objectives
In the course of years of paying premiums, some life insurance policies build up cash value. Other policies that are in the life insurance space also contain an investment aspect, such as in the case of ULIPs. Your premium is utilised in buying and earns a return on marketable securities. They pile up over the years to form a rather huge pile that can be used to achieve goals such as your child’s education, and child marriage, among others.
- Dispersal And Safeguard Of Wealth
Life insurance policies fall among the safest long-term investment products. This makes it possible for a life insurance policy to protect your wealth from taxes and inflation for a longer time. Due to this feature, life insurance plans can be considered instruments which are extremely suitable for retired investors who want to establish permanent pensions.
A sound life insurance policy provides essential security, ensuring the well-being of those dear to the policyholder in his or her absence. Life insurance is considered an essential part of a financial plan since, in addition to offering a death benefit, it can offer a maturity benefit as well for the future.
